After the Republican Party's disastrous midterm defeat, can Trump still maintain his tariff policy? Don’t expect any changes before 2029.

The hope for a reduction in tariffs may not arrive until after 2029, and even then the room for maneuver will be quite limited.

Results of the U.S. midterm elections showed that dissatisfaction with the cost of living was a core concern for voters, and tariff policy is one of the main factors contributing to rising prices. This is widely seen as a major reason for the Republican Party’s significant losses in this election.

However, according to Chasing Wind Trading Desk, Bank of America Securities pointed out in its latest report that there will be no substantial changes to tariff policy in the short term, because Congress has already handed over control of trade policy to the executive branch, and the current administration holds full leadership in this area.

From a longer-term perspective, even if the political landscape shifts after 2028, the likelihood of a significant tariff rollback remains limited. The key constraint lies in finances: the federal government is currently facing a fiscal deficit of up to $2 trillion, while annual tariff revenues are about $310 billion—close to 1% of GDP—and have become a critical source of federal revenue that cannot be easily given up. This means that for markets hoping for a relaxation in tariffs, there is virtually no good news to expect in the near term.

The Bank of America report makes it clear that, for now, the impact of the “blue wave” on tariff policy is “none.” The core reason is that Congress has long ceded control of trade policy to the executive branch; even if the opposition party wins an election, it cannot directly repeal existing tariffs through legislation.

This structural arrangement means the market should not directly link the outcome of midterm elections to the direction of tariff policy. During the Trump administration, the current tariff framework will remain stable, and the path of relying on Congress to pressure for tariff relaxation is basically unrealistic.

Even if the timeline is extended to after 2028, Bank of America's economists only expect “limited room for rollback” on tariffs, due to fiscal pressure.

The report shows that over the past 12 months, federal tariff revenue totaled about $310 billion, nearly 1% of GDP. Of this, about $23 billion came from Vietnam, $21 billion from six other ASEAN countries, and about $12 billion from India. Altogether, tariff revenue from China, Southeast Asia, and India was about $126 billion. Bank of America believes tariffs on these regions are most likely to remain in place long term.

With a $2 trillion fiscal deficit, the federal government simply cannot afford the loss of revenue that would result from a major cancellation of tariffs. This fiscal constraint is the fundamental structural barrier to adjustments in tariff policy.

The report indicates that any real possibility for adjustment in the future mainly exists in the direction of the United States' traditional allies. Tariff revenues from the EU, Canada, Mexico, Japan, and South Korea total more than $100 billion, about 0.3% of GDP. Specifically, the EU contributes about $43 billion, Mexico about $22 billion, Japan about $17 billion, Canada about $13 billion, and South Korea about $13 billion.

Bank of America believes that for the sake of diplomacy and alliance relationships, future administrations may have some room for negotiation and compromise in this area. However, even a partial relaxation of tariffs on allies would be a drop in the bucket compared to the current fiscal shortfall, and would not be enough to fundamentally change the structure of tariff revenues.

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